Complementarity And Soccer Oligarchy

Professional soccer leagues tend to be dominated year after year by a small number of top teams. Major League Baseball on the other hand, has seen World Series appearances by the Detroit Tigers, the Texas Rangers, the Philadelphia Phillies, the Tampa Bay Rays, etc. It seems like any team can assemble a champion.

These two sports have very different production functions. A baseball team is basically a collection of individuals. Among team sports its the closest thing to an individual sport. A team’s output is basically the sum of individual outputs with very little complementarity. In baseball there is very little talk of one player making his teammates better. The production function is additive and, offensively, players are perfectly substitutable.

Soccer is at the other extreme where players are highly complementary. Scoring a goal is a total team effort. Even the best striker needs good chances. In soccer, the best players are more productive when there are other good players on the team. The production function is closer to Leontif.

These differences in production explain the differences in market structure. Consider competitive bidding for a top player in the two sports. In baseball that player’s marginal product is the same on any team he would play for so many teams will compete and any team could land him. In soccer that player’s marginal value is highest for the team that is already the best. The competition is going to be very weak and he is likely to sign with the best team.

In baseball competition levels the playing field. In soccer it tilts it even further.

16 comments

It’s the structure of the market, not the structure of the game. There is only one world-class baseball league, and they are a legal monopoly. There are multiple world-class soccer leagues, plus other worse leagues where ownerships of some teams have tons of cash which they are willing to throw at prestige (e.g. Russia, China, UAE, increasingly the US).

As a result there are exit options (for players) in soccer that don’t exist in baseball, and entry options (for teams) in soccer which don’t exist in baseball. Relatively short-term (by baseball standards) professional contracts exist from the beginning of a soccer career, while in baseball the players are forced into indentured servitude for the first 6 years of their major league careers, *after* being forced into indentured servitude for (normally) 3-5 years previously in the minor leagues. In baseball, talent is allocated according to a draft, and the players have no say over what team they “belong” to; in soccer that isn’t the case. You are free to sign with any team anywhere in the world.

Which means you can go to the highest bidder, which will often be the teams with the most money, which are often (not always) the most successful teams.

Therefore, in baseball a team can be “bad” for several years in a row on purpose as a competitive strategy: stockpile high draft picks who will earn sub-market wages for a decade, and then try to compete when they all mature at the same time. Voila: Tampa Bay Rays. And now the Houston Astros. In the meantime, if it doesn’t work out you still make a profit because of your share of monopoly rents from revenue sharing and public funding of stadia.

In soccer, if this happened players would just leave the “rebuilding” team and join a winning team at first opportunity, which is never very far away. A losing team is relegated to a lower league, which means losing massive revenue streams, which means an inability to attract new players. Teams can collapse as a result, being forced into public “administration” or even closure. This is impossible in professional baseball.

So soccer teams have strong incentives to be fairly good always, even if that means never being able to challenge for a championship, because at least they won’t be relegated. Poor baseball teams have incentives to build for years in order to have that one shot at a title.

Ice hockey is similar to soccer in terms of team effort required, yet top competitions (NHL or for example Czech Extraliga) are not dominated (as much as soccer) by a few teams. The key factor is the tournament design – the additional playoff stage increases uncertainty of outcome (decreases the probability that the best team wins), which also changes incentives for investing into top players.

I think ice hockey is closer to baseball. For one thing, each separate line is a perfectly substitutable module. Second, within an active line there is a lot less complementarity than in soccer. It is much easier for an individual to create his own chances in hockey.

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I was thinking of a related question, what explains the differences in trends in competitive balance across U.S. college sports? Here you shut off conventional labor market bidding channels but you can still pour money into coaching, facilities, and recruiting.

In men’s basketball, we’ve seen “mid-majors” like Wichita State and Butler going much deeper in the tournament in the past. In women’s basketball, only 1 school from a non-BCS conference (Delaware) made the Sweet 16 and promptly lost, and that’s been true for years. In men’s ice hockey, the Frozen Four which is usually dominated by schools like Michigan/BC/BU/Wisconsin/N. Dakota now consists of Yale, Quinnipiac, UMass-Lowell, and St. Cloud State. Football, despite inroads of programs like Boise State, has relatively limited competitive balance, though this may be more about the BCS erecting barriers to outsiders.

My thinking is that the big increases in spots TV money/exposure have caused the biggest schools to invest more heavily in football and less in other high-profile men’s sports, and then lesser schools invest more heavily in men’s basketball, and even lesser schools who have men’s hockey invest in men’s hockey, and so you have an increase in parity in men’s basketball and men’s hockey but no such increase in football or women’s basketball.

While the first post points out most of my problems with this article, it is not true that the best player adds more at a top team in a sporting sense. A huge star playing for a less competitive team can have a huge impact on them and the players around them. The more top players you have the less impact the next top player will have. But top players end up at the top teams as there is competition among the teams, outside options for the players, and the players want to win trophies/championships, etc.

It has practically nothing to do with whether baseball is a quasi-individual sport and soccer a team sport.

Although the baseball runs production function may be additive in player quality, it is not true that the win production function is similarly additive. Given a distribution of opponent runs it is straightforward to see that wins are non-linear in runs scored – runs for my team have a higher marginal value when my team scores near my opponent’s average number of runs and this value decreases as the difference grows. Very high and very low quality teams thus have relatively low marginal value of quality. This is a strange production function indeed – complementarities are increasing and then decreasing in quality of teammates.

These non-linearities between team quality and wins are likely in all team sports. The logic is starkest in baseball because as you say team quality is very close to additive in player quality.

Awesome insight. How’s this for a further formalization: The production function is dictated by the extent to which the two teams control which players share the burden of play.

In baseball, it is set by the rules. Each player has one at bat, so a linear model works well. I think Leontif would be most closely achieved by doubles tennis, since the opposing team has every incentive to hit the ball to the weaker player. I bet sports like soccer and hockey are somewhere in between. Closer to Leontif on defense. And for offense, it is possible it is beyond linear (towards a max function) since the team can give the ball to their best player — though the defense can respond in way to mitigate this effect. I think we see this in American football, where the variance of salaries is much higher on offense relative to defense.

My impression is that soccer oligarchy has a lot to do with television, and TV rights in particular. In Spain, for example, negotiations have switched from collective negotiations to individual deals. As a result, Real Madrid and Barcelona have become increasingly rich, and smaller teams have been unable to keep pace. This resulted in an increasing fanbase for Madrid and Barcelona, in turn raising their future deals. (In other countries — e.g. England — deals are still collective). The Champions League has probably also contributed to creating one or two “national teams” in each European country. In American sports, there is no international competition that is regarded as more important than the domestic ones.

Most polls I’ve seen of number of supporters in the past half century indicate an increasing concentration. (This is definitely true in Brazil and Argentina).

This answer, like a few above, is appealing to ability to pay trumping willingness to pay. Without budget constraints Real and Barcelona have no intrinsic advantage. In big money sports I doubt that budget constraints matter that much. But that’s debatable for sure.

But American Football also has a lot of churn among the top teams, despite being quite different from baseball, with very high team complementarities.

I think you need some other explanations. Some ideas: relegation and promotion, competing leagues, differences in team ownership structure, institutional strength of the central leadership of a league, etc.

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